Wal-Mart's Online Video Failure: Yet Another Lesson...

One e-commerce refrain we've heard since 1995 is that once the
established real-world brands get their act together, the online
pure-plays will be toast. We're still waiting.

Why couldn't Barnesandnoble.com put Amazon out of business? Why
can't BlockBuster, Wal-Mart, et al, put Netflix out of business?
Why can't the networks put YouTube out of business? Why can't any
number of online music start-ups put Apple out of business?

Some of the many reasons:

Online is a different business. Understanding
half of the skills and competencies required--namely,
procurement--doesn't cut it.

Early-mover advantage is critical: online
stores open their doors to the entire world all at once.

The advantages of an established brand aren't minimal,
but they're also not enough.

Channel conflict: No matter how savvy and
powerful you are, your first priority as an established offline
business is to protect your core business--and your attempts to
do so almost always make your online business fall short

Start-up vs Fortune 500 culture.

Over the past few years, some Fortune 500 companies (including
Wal-Mart) have been able to overcome these challenges and build
respectable sideline web businesses. The online businesses will
always be sidelines, however, and they have not yet threatened
the pure-play leaders.

If anyone ever threatens Netflix in movie rentals, or YouTube in
online video, it will likely be another pure-play without a
legacy business to protect (and, for the most part, this includes
Hulu, which even in its independence is still hamstrung by
channel conflict).